North American investors are away in observance of the Labor Day. Understandably, it has been a quiet day in FX, bond and stock markets. But for one particular market, it has been an exceptionally volatile day. Crude oil took a roller coaster ride, rising nearly 5% this morning before giving up much of those gains.
Gold and silver have extended their gains made on the back of the weaker-than-expected U.S. employment report on Friday. The dollar-denominated commodities have obviously found support from a slightly weaker dollar as investors lowered their expectations about the timing of the next rate increase. With the key U.S. ISM services PMI due to be released shortly, the near-term outlook for the dollar, and in turn precious metals, could change course once again.
Crude oil prices swung wildly into the positive territory yesterday. The rally eventually came to a halt around the $50 per barrel handle for Brent and $48 for WTI, and both contracts have been trending lower from these levels until an hour or so ago. It looks like oil prices have now found some short-covering support ahead of today’s official U.S. crude oil inventories report, due at 15:30 BST (10:30 ET).
The American Petroleum Institute (API), an industry group, reported a sharper-than-expected 2.1 million barrel rise in U.S. weekly crude stockpiles. As a result, hopes that the official data from the EIA would reveal a 1.3 million decrease – the first decline in two weeks – were dashed.
Since the outcome of the Brexit vote two weeks ago today, the dollar has risen sharply against both the euro and more noticeably the pound; government bonds have repeatedly rallied to new highs -- that’s to say their yields have fallen to record low levels, while the equity markets have been all over the place.